CANADA FX DEBT-C$ strengthens on better-than-expected GDP growth

Reuters Staff

3 Min Read

* C$ at C$1.0427 vs US$, or 95.90 U.S. cents
* Canadian GDP grows by 0.3 pct in August
* Canadian bond prices flat to higher
By Andrea Hopkins
TORONTO, Oct 31 (Reuters) - The Canadian dollar ended
stronger against the U.S. currency on Thursday, rebounding from
a seven-week low as data showed the domestic economy grew at a
slightly better-than-expected pace in August.
The oil and gas industry helped the Canadian economy grow by
0.3 percent in August, topping economists' expectations for a
0.2 percent rise.
The firm data on economic growth pushed the Canadian dollar
higher even as the greenback strengthened against other major
currencies.
"It's been kind of an interesting move, because not only is
CAD stronger, it's stronger on a day when the euro is materially
weaker, which just speaks to the domestic nature of the strength
today," said Camilla Sutton, chief currency strategist at
Scotiabank.
"A stronger-than-expected Canadian GDP report saw CAD
retrace some of the losses it had suffered earlier in the week."
The Canadian dollar ended the North American
session at C$1.0427 versus the greenback, or 95.90 U.S. cents,
well above Wednesday's close of C$1.0484, or 95.38 U.S. cents.
Sutton said upside was likely limited, however, as the focus
remains on the strong U.S. dollar amid expectations of diverging
policy paths by the U.S. and European central banks.
"Tomorrow marks the first day of a new month and I suspect
that the general theme of a stronger U.S. dollar is likely the
one. I suspect CAD will be range-bound, and it is unlikely to
make significant further gains tomorrow. We have support at the
100-day moving average, C$1.0381," she said.
Investor focus remains on global central banks. Market
expectations that the Fed would continue its $85 billion a month
bond-buying program well into next year were not fully met
Wednesday at the end of a Fed meeting, and some now see a chance
for the Fed to begin a wind-down in December.
The current pace of purchases has pressured the dollar and
driven Treasury yields lower, while boosting equities and some
commodities. Those trends were partially reversing on Thursday.
In the euro zone, by contrast, inflation dropped to its
lowest in nearly four years and raised speculation the European
Central Bank will further ease monetary policy. The euro fell on
the inflation data, and the greenback extended gains.
A shift in policy by the Bank of Canada last week had
knocked the Canadian currency lower in recent sessions after the
central bank dropped its rate-hike bias, pushing analysts'
expectations for an eventual increase in interest rates further
out into the future.
Canadian government bond prices were flat to higher across
the maturity curve. The two-year bond was flat and
yielding 1.102 percent, and the benchmark 10-year bond
added 3 Canadian cents to yield 2.420 percent.